Before the world was put on hold last week under the spectre of COVID-19, the RTA Amendment Bill was commanding a lot of attention as it made its way through parliament.
On the 20th February the Bill passed its first reading, and last week saw the deadline for Select Committee submissions. But where are we at now?
Last week Finance Minister Grant Robinson announced two important short-term measures to support tenants over this period:
- A freeze on all rent increases
- A freeze on all 90-day no-cause tenancy terminations
At this stage, there is no indication as to how long these measures will be in place. Tenants are still able to give notice and vacate – however this has been strongly advised against.
Parliament is now no longer is session due to COVID-19, however this latest step to freeze no-cause terminations is a strong indicator that the passing of this Bill is seen by the government as a foregone conclusion.
The Significance of the RTA Amendment Bill:
As you are probably aware, there are a raft of proposed amendments in the Bill – some of which will have a far greater impact than others.
Key RTA Amendment: Removal of the 90 Day No-Cause Termination of a Periodic Tenancy
This is the clause that has caused the greatest reaction among landlords and property investors. Essentially it puts the onus on landlords to provide a ‘justified’ reason to end a periodic tenancy. At present, a landlord is able to give a problematic tenant 90 days-notice to end the tenancy – without having to provide often difficult and hard-to-prove evidence of fault. The classic example being rowdy tenants – who despite paying the rent on time - use threatening behaviour to the landlord and neighbours.
It’s important to note that this clause is rarely enacted by landlords (it’s estimated to be used on less than 3% of tenancies) – but provides an important safeguard for owners to ensure they are able to exercise some responsibility toward their neighbouring properties.
Point Property Management strongly advocates for the retention of this important backstop for property owners. However, we are confident that our tenant selection process is robust and thorough to choose the right tenants from the start.
Expired Fixed Term Tenancies will automatically become Period Tenancy Agreements, unless otherwise agreed.
The aim of this clause is to provide greater certainty for tenants – so that they will know they have a tenancy agreement in place once their fixed term tenancy expires.
While this does further erode the rights of the property owner – it is workable if you have a prompt property management team on your side who will manage and renegotiate your tenancy agreements before they expire.
Tenants will be able to make minor alterations to the property without prior consent – as long as it fits into a certain criteria (such as baby-proofing, installing doorbells, hanging pictures).
No landlord would be unhappy with a tenant wanting the property safe for their child – however an open slather could be problematic. Tenants may end up putting in lots of holes as a result – and there are many who are not that familiar with using a hammer! This clause does require tenants to restore the property to its original state at the end of their tenancy – however the concern is this will simply create another area for contention and debate.
Ensuring extensive and accurate Entry Inspection Reports, and well as regular property inspections where any issues can be addressed and recorded will curtail any potential conflict over this allowance.
There needs to be a balance where a tenant can feel at home and have the property practically suited to their needs – but the integrity of ownership is maintained.
The Tenancy Tribunal will have authority to impart higher financial penalties – and parties absolved of actions by the Tribunal will be allowed anonymity.
The proposed Bill will inevitably have the effect of creating a greater work-load for the Tenancy Tribunal. The concern here is longer waiting periods for both landlords and tenants – however the Bill is proposing to equip the Tribunal with greater authority.
While our Point Property Managers are trained and experienced in dealing with the Tenancy Tribunal – our obvious first preference is to avoid it altogether. The outcome of the proposed changes in the Bill will put greater pressure on ensuring every tenancy agreement and contact with tenants is well documented and able to be used as evidential proof should the need arise.
Rent increases would be limited to once every twelve months, and Rental Bidding Prohibited.
Most within the industry are comfortable with this – Point Property does not use rental bidding, and in most cases rental reviews are conducted every 12 months as the norm.
So Where Does This Leave Us?
Following the announcement by Grant Robinson, the REINZ has called for the RTA Amendment Bill to be completely shelved until the COVID-19 crisis is over. As the time of writing, there has been no official response on this from the government.
From our perspective, ultimately the biggest issue with these proposed reforms is the removal of 90 day no-cause terminations. It’s an important option for landlords to rely on, and the fact that it is rarely used shows that it is not abused.
As a Point Property owner, you can be confident we are involved in this process and are working on your behalf to protect your rights. Point Property Management is a member of the NZPIF, as well as a REINZ member – and both of these organisations are working hard to lobby the Government.
For further detailed information on the Residential Tenancies Amendment Bill, click here to visit the NZPIF website.
We will keep in touch with developments as they happen – and be assured the team here at Point Property will continue to work hard protect your investment, as well as maintain compliance.
If you have any further questions, contact your Property Manager, or talk to the team here at Point Property Management.
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